Peloton shares crash as losses mount, revenue guidance cut

Peloton shares crashed on Tuesday after the at-home fitness company posted worse-than-expected losses for the third quarter and downgraded its revenue guidance.

The company - which suffered some bad press recently after Sex and the City’s Mr Big died of a heart attack following a stint on one of its exercise bikes - reported a net loss of $757.1m, versus a loss of $8.6m in the same period a year ago and expectations of $132.1m.

Meanwhile, revenue fell to $964.3m from $1.26bn in the third quarter of 2021, when more people were exercising at home due to pandemic restrictions.

Peloton said it now expects to generate fourth-quarter revenue of between $675m and $700. This outlook "reflects softer demand versus our February forecast, partially offset by accelerated sales we’ve seen as a result of our recent hardware price reductions".

Chief executive and president Barry McCarthy said in a letter to shareholders that Peloton had ended the quarter with $879m in unrestricted cash and cash equivalents, leaving the group "thinly capitalised for a business of our scale".

To strengthen the balance sheet, the company has signed a deal with JP Morgan and Goldman Sachs to borrow $750m in five-year term debt, he said.

At 1455 BST, the shares were down 19% at $11.44.

CMC Markets analyst Michael Hewson said: "Peloton’s biggest problem is its inventory, it simply has too many products it can’t shift, with little sign of a demand pickup any time soon. Its bikes and treadmills are still very expensive even with the recent price cuts, and with inflation still rising consumers are going to be even more price sensitive than they are now.

"This high level of inventory is a problem for a company with not much in the way of cash and could see it become the target of renewed takeover interest in the coming weeks, even with the long-term funding deal of $750m it has just agreed with JPMorgan and Goldman Sachs.

"There was some interest a few months ago, with names like Apple, Nike and Amazon getting bandied about, and with the shares even lower now than they were then there could well be renewed interest at a much lower price.

"In short, it’s been a horrible 18 months for Peloton, going from the yellow jersey pandemic leader to the lantern rouge, or red lantern position, sliding ignominiously to the rear of the pack, as we look to trade at new record lows."